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http://www.hollywoodreporter.com/thr/business/article_display.jsp?vnu_content_id=1002114724
High court suggests tie-ins OK
By Brooks Boliek
WASHINGTON -- The U.S. Supreme Court ruled Wednesday that "tying
arrangements" linking the sale of some products to others do not violate
antitrust laws. The closely watched case carries economic implications
for the relationship between copyright holders -- from motion picture
studios to sports leagues -- and the theaters and other retailers who
sell their products.
In a unanimous decision in Illinois Tool Works v. Independent Ink, the
court ruled that patent holders do not automatically have enough "market
power" to hinder competition if they require the purchase of a patented
product with another product the company makes.
"Congress, the antitrust enforcement agencies and most economists have
all reached the conclusion that a patent does not necessarily confer
market power upon the patentee," Justice John Paul Stevens wrote for the
court. "Today, we reach the same conclusion."
Although the decision involves the unglamorous world of industrial ink,
it could have an impact on how studios and other copyright holders deal
with distributors. Under a pair of cases in the late 1940s and early
'60s in which the government sued Paramount and Loews theaters,
respectively, the court decided that a copyright owner automatically has
enough "market power" to hinder competition. Those cases helped end the
practice of "block booking."
The MPAA, RIAA, the NFL and other copyright holders asked the justices
in a friend-of-the-court brief to include copyrighted works in their
decision. The brief says, "The copyright holders contended that the
court should decline to presume that antitrust market power arises from
the mere ownership of intellectual property rights, whether patents or
copyrights."
Dan Swanson, an attorney with Gibson, Dunn and Crutcher, who wrote the
copyright industries' brief, said the decision was a good one for rights
holders.
"I think its a landmark ruling for the copyright field as well as the
patent field," he said. "It was unarguably a victory for copyright holders."
That interpretation was disputed by John Mitchell, an attorney who wrote
a brief for the National Association of Theatre Owners and the Video
Software Dealers Assn. It is unclear from the opinion whether the court
equated copyrights and patents, Mitchell said. NATO and VSDA fear that
undoing the prohibition against tie-in arrangements for copyrighted
works will allow the studios and other big copyright holders to force
them to take unpopular fare in order to get the hits.
"They realized this is a patent case," Mitchell said in an interview.
"The court went out of its way to say we're changing our presumption of
market power in a patent case. Their almost deafening silence on
copyright speaks volumes."
While NATO and VSDA might be able to take some comfort in the absence of
specificity regarding copyrights, Stevens wasn't entirely mute on the issue.
"While some such arrangements are still unlawful, such as those that are
the product of a true monopoly or a marketwide conspiracy, that
conclusion must be supported by proof of power in the relevant market
rather than by a mere presumption thereof," he wrote, citing the 1948
Paramount case.
Swanson said Stevens didn't have to directly mention the copyright
industries because the controlling cases are copyright cases, and that
the Justice Department and the Federal Trade Commission in 1995 have
made patents and copyrights interchangeable under antitrust law.
"He doesn't need to say it," Swanson said. "Because he says we have
resolved the issue across the board."
Lawyers may quibble, but MPAA chairman and CEO Dan Glickman declared
victory.
"This is good news for all creators and innovators," he said. "We are
pleased the Supreme Court reached a unanimous decision to reject the
40-year-old, outdated rule that having a copyright is the equivalent of
having market power."
Carole Handler, an intellectual property attorney at Foley & Lardner and
an adjunct law professor at USC, said the ruling didn't immediately give
the green light to the studios and record companies to muscle the retailers.
"This is not a license to violate antitrust laws," she said. "It has
leveled the playing field. Plaintiffs used to have a huge advantage that
was not based on any economic analysis. Now they have to prove the
rights holder has market power."
While the court ruled that tie-in arrangements generally do not violate
antitrust law, the ink case remains unresolved. The court sent the
matter back for trial, allowing Independent Ink a chance to prove in
court that Illinois Tool has market power.
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